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Consumer spending to get weaker

Jason Cadden

Tighter family finances and falling consumer confidence are likely to put the brakes on spending in the coming months.

A Dun & Bradstreet (D&B) survey showed that financial stress increased again in April and is set to worsen in the coming months.

News of spending cuts and increased taxes from the May 13 federal budget and moderate wages growth in the first three months of the year likely hurt consumer confidence, the survey's report said.

The D&B Consumer Financial Stress Index rose 13.8 points in April to 18.7 points, and by July the index is forecast to rise to 24.8 points, the second highest level in the survey's four year history.

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Dun and Bradstreet economic adviser Stephen Koukoulas said the figures match other data showing a fall in consumer confidence.

"It is looming as a genuine threat to the recent strength in spending if consumers respond to financial difficulty by paring back expenditure," he said.

"Causes of the rise in consumer financial stress are hard to pinpoint, but appear linked to the still weak growth in household incomes, accelerating credit growth and a still fragile jobs market."

Another survey released on Tuesday showed shoppers' moods continue to turn sour as a result of the federal budget.

ANZ-Roy Morgan Consumer Confidence fell a further 1.1 per cent in the week ending May 25.

Confidence is now down 15 per cent from five weeks ago when news about various budget policies began to be leaked.

ANZ head of Australian economics Justin Fabo said the survey shows that spending could soften in the coming months.

"While the policies from the budget are likely to be a modest drag on consumer spending over the next few years, the hit to confidence, if sustained, could prove to be more important," he said.

"At this stage, ANZ's bottom line for the household consumption outlook remains that consumer spending will improve this year, although the confidence impacts from the budget may weigh on the speed of that recovery."